Comments on: On the Austrian Theory of Money, a Reply to David Graeber http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/ Property - Prosperity - Peace Tue, 08 Apr 2014 09:17:32 +0000 hourly 1 http://wordpress.org/?v=3.9 By: Vilhelmo http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-3314 Thu, 22 Aug 2013 10:53:31 +0000 http://libertarianstandard.com/?p=9094#comment-3314

the boundaries of AE are set by human action in all of its manifestations, and that AE’s methodology is a priori.

What use is Austrian economics when it comes to analyzing non-market economies?

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By: Vilhelmo http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-3313 Thu, 22 Aug 2013 10:51:08 +0000 http://libertarianstandard.com/?p=9094#comment-3313

By convention, we call the non-monetary ones “barter” — it is much shorter than “non-monetary interpersonal exchange.”

This is not how barter is normally defined by non-Austrians.

It is usually defined as “the direct spot exchange of commodities between parties each trying to maximize their utility.”

This explicitly excludes gift & credit exchange along with monetary.
For almost all purposes your definition is useless.

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By: Vilhelmo http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-3295 Thu, 15 Aug 2013 11:14:16 +0000 http://libertarianstandard.com/?p=9094#comment-3295 Ned Netterville:

Gold, the universal first choice of most people among all forms of money, is not a form of credit nor is it a debt. Gold coins are merely gold, a commodity, cast into a convenient size, shape and form. No credit nor debt nor State need be involved.

Gold was not the first form that money took.
All money, regardless of physical form, represents a debt.

The value of almost all Gold coins is set, by fiat, by the issuer, that, in the case of ancient coins, is always the public sector.
Any gold standard is also a fiat system, the value of gold being set by government instead of by markets.

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By: Vilhelmo http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-3294 Thu, 15 Aug 2013 11:03:04 +0000 http://libertarianstandard.com/?p=9094#comment-3294 Mesopotamian Bronze age “silver money” was “credit money”, it’s value set by fiat & issued by the temples & palaces, & accepted, along with other commodities at prices (ratios) fixed in an administered price system, in payment of obligations owed to the temples & palaces.

“It was the overall schedule of price equivalencies, created along with weights and measures to form a system of interlocking parts able to coordinate resource flows and denominate debts owed to the public institutions.” – Michael Hudson

Money was created “to facilitate settlement of the debts that ensued from Mesopotamia’s specialization of production as between the large institutions and families on the land. The debts owed by traders to the temples and palaces for commercial advances were part of this system, as were rent debts. Viewing trade as barter obscures these debt relations between public and private enterprise.” – Michael Hudson

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By: Vilhelmo http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-3293 Thu, 15 Aug 2013 10:48:18 +0000 http://libertarianstandard.com/?p=9094#comment-3293 You are incorrectly assuming the universal existence of the
• right to the product of one’s labour
• right to engage in exchange
• right to property
• right to engage in production
• buying & selling

Your defintion of barter is incorrect & utterly useless.

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By: Vilhelmo http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-3292 Thu, 15 Aug 2013 10:38:34 +0000 http://libertarianstandard.com/?p=9094#comment-3292

Graeber’s account of Mesopotamia supports these conclusions. The economy was sufficiently complex to need money. Silver had preexisting exchange ratios in the form of cultural understandings and credit arrangements. It was highly marketable because of the demand by temple complexes and thus it emerged as money (and, hence, the unit of account).

Nonsense.

Silver was acquired, refined, standardized, issued into the economyc as silver money, sanctioned, valued & set as the unit of account, by the temples & palaces (public sector).
The value of “silver money” was set by fiat equal to a gur of barley.

From expert Michael Hudson:
“The essential point to recognize is that the early monetary system was a more complex phenomenon than the monetary commodity itself. Its major initial application was to facilitate settlement of the debts that ensued from Mesopotamia’s specialization of production as between the large institutions and families on the land. The debts owed by traders to the temples and palaces for commercial advances were part of this system, as were rent debts.

“‘Money’ was more than a commodity; it was the overall schedule of price equivalencies, created along with weights and measures to form a system of interlocking parts able to coordinate resource flows and denominate debts owed to the public institutions.”

“Rulers were charged with maintaining the rhythms of nature, they proclaimed Clean Slates to restore balance by annulling debts owed to the palace, its collectors and other creditors.”

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By: Vilhelmo http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-3291 Thu, 15 Aug 2013 10:25:54 +0000 http://libertarianstandard.com/?p=9094#comment-3291 “Economically, “barter” applies to all interpersonal exchanges that do not involve money; exactly what form the barter transactions take is an empirical question and beyond the reach of economic theory.”

This is not the usually definition (or Graeber’s) of barter.
Barter is defined as a form of economic echange involving the immediate direct exchange of commodities by two parties both trying to maximize their utility.
This excludes credit, monetary & gift exchange.

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By: Ned Netterville http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-2047 Wed, 21 Sep 2011 16:15:42 +0000 http://libertarianstandard.com/?p=9094#comment-2047 Calguscus: Naah!

Gold is the first choice–as a matter of people’s preference. I did not say it was temporally the first thing used as money. That is your straw man. Own it. Read what I wrote and dispute that rather than flailing your misinterpretation. And talk about talking past each other. You didn’t say a word in support of your amazing assertion that gold is a form of debt (or credit), unless your curous reference to semantics and definitions was a subtle acknowledgment that you were wrong.

All fiat currencies are imposed by force, the force of legal-tender laws forcibly removing people’s freedom to chose what it is they will use for contracts and to settle debts, “public and private,” as those dollar fiats put it. The fact that those fiats are only used because people are forced to use them demonstrates beyond argument that gold (and to a lesser extent silver) are the people’s first choice (think preference, not time) in money. Care to prove me wrong? Get rid of those legal-tender laws, as well as any counterfeiting laws designed to protect governments’ fiat-money monopolies, and then we can argue about it.

The rising dollar price of gold ($1795 at the moment) indicates that many people today are using gold as a store of wealth, which is to say, as money. It is being used by more and more smart people who have had it up to their choking point with those ceaselessly depreciating fiat currencies they are forced to accept, which drain away rather than store their hard-earned wealth. That is precisely what people in the real world are actually doing with gold. You should try it. Those who have been using it to store their wealth as it comes in (viz., for money), which they don’t need immediately for transaction requiring legal tender, have, over the past decade or so, found that their gold very effectively served to store their wealth–if it hasn’t also made them a little wealthier. The only reason gold hasn’t replaced fiats in people’s exchange transaction is because they are forced by law to use fiats.

Calguscus, you assert, without a shred of logical support:

“Monetary Analysis is the most general term – Schumpeter usefully divided economics into Monetary Analysis & Real Analysis, basically the division between creditary/state theories and commodity theories. Mises & Menger simply did not understand what the Monetary Analysts were saying, and I am not sure that people here do either.”

Monetary analysis??? Mises invented it! Before his THEORY OF MONEY AND CREDIT, monetary analysis didn’t exist. His dissertation on the subject at a very young age remains the most comprehensive and authoritative monetary analysis yet written. Schumpeter wouldn’t have been able to make his unfortunate division had not Mises introduced him to monetary analysis. But divide it from “real analysis?” Come, come. It can’t be done–if it is to be considered economics rather than tiddliwinks.

The first comprehensive exposition on money remains the best ever written, viz., Mises 1912 classic, THE THEORY OF MONEY AND CREDIT.

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By: Calgacus http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-2046 Tue, 20 Sep 2011 19:16:06 +0000 http://libertarianstandard.com/?p=9094#comment-2046 My main interest was clearing up semantic points. People will talk past each other if they do not understand each other’s definitions. Pretty much the history of economics in a nutshell. :-)
Gold, the universal first choice of most people among all forms of money No, in basically every way. Gold was a historical latecomer. And since nobody has a gold standard, it is not used as money anywhere in any sense nowadays. Do people pay their bills with gold? Do people save in gold, like dragons sitting on their hoards? Why not have a theory that applies to what people actually do, to Human Action in the real world? And then notice that it implies that the Austrian theory is founded on a spectacularly wrong category mistake.
Monetary Analysis is the most general term – Schumpeter usefully divided economics into Monetary Analysis & Real Analysis, basically the division between creditary/state theories and commodity theories. Mises & Menger simply did not understand what the Monetary Analysts were saying, and I am not sure that people here do either. Although there was some progression in Mises’s understanding, perhaps if he had lived to 140 he would have gotten it. The best & most careful current exposition of the nature of money is Ingham’s The Nature of Money. Again, the Austrian error could not be more fundamental. They have a theory of “wedding rings” (a particular physical representation of a relationship) which they confuse with the relationship itself ( “marriages”; the credit/debt relationship and a particular type of such a relationship: money).

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By: Ned Netterville http://libertarianstandard.com/2011/09/14/on-the-austrian-theory-of-money-a-reply-to-david-graeber/#comment-2043 Sun, 18 Sep 2011 22:28:04 +0000 http://libertarianstandard.com/?p=9094#comment-2043 Eh, Calgascus, can you explain this: “Money is a form of credit; all money is debt. Dollar bills, Treasury bonds, bank reserves, gold coins, tally sticks are all negotiable credit/debt instruments. Graeber, along with these many others, holds that there is no evidence for the commodity theory, and it is a terrible description of actual economies.”

This seems to me to be so obviously wrong that I find it hard to believe that anyone would buy it. Gold, the universal first choice of most people among all forms of money, is not a form of credit nor is it a debt. Gold coins are merely gold, a commodity, cast into a convenient size, shape and form. No credit nor debt nor State need be involved. If what you say is the position of “Graeber, MMT, Institutionalist, Keynesian, Creditary, Chartalist, [and] Monetary Analyst, then Mises HUMAN ACTION should be required reading for all of those you mention who would like to improve the quality of their output.

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